Appraising the Non-Existent: The Delaware Courts' Struggle with Control Premiums

33 Pages Posted: 2 Jun 2003  

William J. Carney

Emory University School of Law

Mark Heimendinger

Milbank, Tweed, Hadley & McCloy

Abstract

This paper examines the holdings of the Delaware courts that a control premium must be added to the market value of shares in freeze-out transactions. It finds this result is not required by prior Delaware law. We argue that there is no control premium absent a current transaction in control, and that assumptions of control premia in freeze-outs are simply speculation. Awarding control premia provides a windfall gain for public shareholders, and is contrary to the treatment of public shareholders who receive publicly traded shares in other mergers.

JEL Classification: G34, K22

Suggested Citation

Carney, William J. and Heimendinger, Mark, Appraising the Non-Existent: The Delaware Courts' Struggle with Control Premiums. University of Pennsylvania Law Review, Vol. 152, 2003. Available at SSRN: https://ssrn.com/abstract=399762 or http://dx.doi.org/10.2139/ssrn.399762

William J. Carney (Contact Author)

Emory University School of Law ( email )

1301 Clifton Road
Atlanta, GA 30322
United States
404-727-6807 (Phone)
404-727-6820 (Fax)

Mark Heimendinger

Milbank, Tweed, Hadley & McCloy ( email )

1 Chase Manhattan Plaza
New York, NY 10005
United States
(212) 530-5614 (Phone)

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